Pandora I.P.O. Underwriters Got It Right (Sort Of) - NYTimes.com

Make that closer to a $2B mkt cap for Pandora…

As the offering approached, the underwriters raised the target price to a final sale price of $16, from a range of $7 to $9.The stock finished the day at $17.42 after hitting a high of $26. First-day returns were 8.9 percent. This is in the average range for I.P.O.’s and a particularly good result considering the recent broad decline in the stock market. (On Thursday, Pandora’s shares fell nearly 24 percent, to $13.26, well below the I.P.O. price.)

The muted first-day pop was possible only because the underwriters used a now-standard formula for hyping these tech I.P.O.’s. It goes like this: Offer a very small number of shares. then retail investors, hungry for Internet riches, will drive up the price by bidding on the small number of shares offered in the market.

Pandora I.P.O. Underwriters Got It Right (Sort Of) - NYTimes.com